Credit, collections & insolvency news

The National Housing Federation, the Scottish Federation of Housing Associations, Community Housing Cymru and the Northern Irish Federation of Housing Associations, are joining together to warn that the Universal Credit system is “flawed” and causing debt, suffering and hardship for the families they house.

Together these organisations represent more than 1,000 housing associations housing over 6.9m people, and they are urgently calling on the Government to change their flagship benefit policy before it is rolled out to all parts of the country this year. This includes scrapping the “two child policy” where families only receive benefits to cover the cost of their first two children.

Surveys of 118 housing associations in England, Wales, and Scotland reveal that their Universal Credit tenants are in £24m of rent arrears. This figure is only a snapshot of what’s happening to social housing tenants across the country on Universal Credit and it’s likely there are many more people struggling financially.

According to the surveys, a total of 65 English housing associations revealed that tenants were dealing with £21.6m of debt. A sample of 29 housing associations in Wales had £1.1m worth of arrears, while 24 housing associations in Scotland had well over £1.2m of arrears debt from tenants on Universal Credit.

The amount of accumulated debt is highest in England because Universal Credit was rolled out there first and has far more people on Universal Credit. In England, in December 2017, there were 155,669 households in the social rented sector who were reliant on Universal Credit to help pay their rent; the figures for Wales and Scotland were 5,339 and 24,368 households respectively.

While tenants may have existing arrears before moving on to Universal Credit, the survey of English housing associations found that tenants on Universal Credit are more than twice as likely to be in debt compared to all other tenants. Nearly three quarters (73%) of Universal Credit tenants are in debt, compared to less than a third (29%) of all other tenants. This is also the case in Scotland, where two thirds (65%) of Universal Credit tenants are in arrears, compared to less than a third (32%) for all other tenants.

Moreover, the English survey found there has been a significant increase in demand for support services from housing associations as more people are moved on to the new system. More than half (51%) of housing associations in England have reported an increase in food bank vouchers issued to people struggling to pay for food, while nearly two thirds (59%) reported an increase in demand for welfare advice needed to help tenants say in their homes.

Universal Credit is merging six existing benefits into one and is being introduced gradually across the UK. To date, it has been rolled out to around 10% of potential claimants in Great Britain, approximately 920,000 people. The number of people in receipt of Universal Credit is set to double this year and it is estimated that around 6.7m working-age people will be registered by 2023.

The “two-child policy” has been blamed for pushing families into poverty because families will no longer receive benefits to cover the cost of feeding and clothing more than two children. So too has the overall benefit cap, which is applied regardless of how high a families’ rent is or the number of children they need to support.

Moreover, under Universal Credit housing association staff have to go through a separate consent process every time they try and sort out a problem with the Department for Work and Pensions on behalf of vulnerable tenants. This makes it significantly harder for housing associations to sort out issues, causing unnecessary delays and stress and hardship for people.

The UK Government addressed some of Universal Credit’s flaws in the last budget in October 2017 and has already committed to making some changes to prevent severely disabled people losing out. However, the four housing federations say these changes aren’t enough and are now urging Government to make five vital changes before hundreds of thousands more people move on to Universal Credit. Five urgent changes needed to Universal Credit have been suggested:

Allow housing association staff and agencies, such as Citizens Advice, to sort out problems with Universal Credit as advocates for tenants. This will help solve problems earlier and minimise rent arrears.

Ensure Universal Credit is paid to people and their landlords on time, at the same time. The DWP has set up a system of Alternative Payment Arrangements so that in some circumstances people’s housing costs can be paid direct to their landlord. At the moment, landlords receive this money in arrears on varied and unpredictable dates which causes confusion. Landlords should be paid rent at the same time it is deducted from the tenants benefit.

The Department for Work and Pensions agreed to put in place Universal Support to provide advice, assistance and support to tenants. They must adapt it to cope with greater numbers and more complex cases, and provide the funding to support more tenants.

Government needs to restore the in-work allowances and revise the rules so that the self-employed, those working in the gig economy with fluctuating pay packets or those who are not paid monthly do not lose out. Present policies mean people are losing money as a consequence of moving onto Universal Credit now.

David Orr, Chief Executive of the National Housing Federation said “Today’s findings show that the Government urgently needs to fix the fundamental flaws in Universal Credit. There are some very simple changes they need to make, like ensuring payments are made on time and allowing housing associations to easily negotiate on behalf of vulnerable tenants, so tenants get their money when they need it. If people aren’t receiving money on time, of course they’re being pushed in to debt. People depend on these vital payments. “But the Government also needs to make bold decisions like amending the two child policy. Families across Great Britain with more than two children are finding themselves with the same amount of money whilst trying to provide the basics for more children.”

“Although the Government has made some positive changes to Universal Credit that will make a difference to families, serious challenges remain and they urgently need to be sorted out.”

Sally Thomas, Chief Executive of the Scottish Federation of Housing Associations said “We have worked with the Government and made significant strides in making Universal Credit fit for purpose. We would like to see the UK Government accept our five asks as they will allow for further vital changes that will facilitate better administration of Universal Credit and reduce its negative effects on tenants. Housing associations are doing everything they can to support tenants through the system but huge challenges remain. To date barely 12% of the total number of claimants have moved over to Universal Credit.”

Stuart Ropke, Chief Executive of Community Housing Cymru said “The recent changes to Universal Credit are welcome, but as it stands, the system is still not fully fit for purpose. Implementing our five asks will improve the mechanisms of the policy while empowering tenants to take responsibility for their finances. However, to do this, it’s crucial more support is offered around budgeting to improve financial and digital literacy among the most vulnerable in our society.”

Ben Collins, Chief Executive of the Northern Ireland Federation of Housing Associations said “A number of important points are raised in these five asks, which we support. In Northern Ireland the UC rollout is at an earlier stage than the rest of the UK and therefore we do not think a pause is necessary for the region. Working closely with the Department for Communities we have secured some important changes. The housing element is paid direct to landlords by default. Joint claims can have the personal element split between both claimants. The personal element can be paid twice monthly instead of once a month as in the rest of the UK. Over the coming months, housing associations will continue to work closely with their tenants to help ensure that the UC rollout is as smooth a process as possible. NIFHA will also work in partnership on an ongoing basis with the other UK housing federations, Department for Communities and other stakeholders.”